Insurance Rates

http://www.msnbc.msn.com/id/35103647...consumer_news/

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Insurance companies base their prices on risk. Drivers under the age of 25 have higher premiums because statistically they are more likely to have an accident. Homeowners with a burglar alarm system get a discount because they tend to have fewer break-ins.

Okay, this makes sense. But why do insurance companies consider your credit history when they set your rates? What does that have to do with their risk? If I lose my job and my credit score drops, am I really more likely to file a claim?

“Absolutely,” says Kenton Brine with the Property Casualty Insurers Association of America.

Brine admits this doesn’t make much sense to a lot of people. But he says after 20 years of studies, the insurance industry can “absolutely prove beyond a shadow of a doubt” that credit scoring is correlated to risk of loss.

“It’s more accurate statistically than your driving record,” he says.

The insurance industry points to a study released by the Federal Trade Commission in July of 2007 that looked at credit scores and auto insurance. It concluded:

“(Credit) scores effectively predict the number of claims consumers file and the total cost of those claims. Their use is likely to make the price of insurance better match the risk of loss that consumers pose. Thus, on average, as a result of the use of scores, higher-risk consumers pay higher premiums and lower-risk consumers pay lower premiums.”

In testimony before Congress in 2008, Robert Hunter, director of insurance for the Consumer Federation of America called the FTC study “substandard” because it relied on data “hand-picked by the insurance industry.”

Even so, he notes, the commission found that insurance scoring “likely leads to African-Americans and Hispanics paying relatively more for automobile insurance than non-Hispanic whites and Asians. Hunter told Congress insurance scores are really a “proxy for race” which should not be allowed.

‘Unfair and discriminatory’
Washington State Insurance Commissioner Mike Kreidler says even if there is a link between credit scores and insurance claims, “it’s unfair and discriminatory” to use this information – especially in the current economy. He wants Washington State lawmakers to ban the use of credit history, education and income to set rates. These factors can impact premiums by as much as 50 percent Kreidler says.

Insurance companies don’t use a score provided by one of the big credit bureaus. They create their own “insurance score” using their own criteria. It’s a secret formula; they won’t tell you how your score is computed. In many states, insurance companies aren’t even required to tell customers their credit history was used to set their premium.

“The secrecy behind this credit scoring is part of what makes it so inherently unfair,” Kreidler says. “No two companies use it the same way and when consumers ask, they can’t get a straight answer on how to get a better score.”

The Washington State Insurance Commissioner’s office has received thousands of complaints about this issue over the last few years. People report their rates were increased after the bank lowered their credit limit or canceled their card, or when they consolidated their credit cards, opened new credit card accounts or bought a large ticket item with deferred interest.

David Andruss of Washougal, Wash., had his premiums go up last month. The 63-year-old retiree always makes his premium payments on time. He didn’t have an accident, get a traffic ticket or file a claim on his homeowners insurance. So why the rate hike?

The insurance company told him his use of credit was too high. There’s a reason for that. Last fall, the bank slashed the credit limit on his card from $16,000 to $8,300. At the time Andruss was carrying a balance of $7,000. He has a lot of medical bills. The bank’s action dramatically changed his ratio of debt-to-available-credit, which lowered his credit score.

Kreidler tells me your insurance score can have a bigger impact on your premium than an at-fault accident.

“It’s just a crazy way and a lazy way on the part of insurance companies to set rates,” Kreidler says. “Quite frankly, they should be embarrassed.”

It could happen to you
Blair and Barbara Patrick live in Olympia, Wash. In 2004, the retired school principals received a notice that their home and car insurance premiums were going up because of their “less than favorable” credit rating.

“It’s very unfair, Mr. Patrick says. “We worked our tails off to maintain a very positive credit rating and have done so and yet we are being penalized.”

In its letter, the insurance company said it was concerned about several things. For example, the Patricks did not have any lines of credit open for more than 40 years. Their J.C. Penny account was only 38 years old.

When the Patricks asked to talk to someone at the company about the scoring process, they were told it was a complicated process and confidential.

“The company basically indicated that they had no provision for contesting or questioning the result,” Mr. Patrick says. “It’s just absurd.”

'Scare tactics'
The insurance industry says between 60 percent and 70 percent of its customers pay less because of their good credit score. The Casualty Insurers Association told Washington state lawmakers if they banned the use of credit histories, rates for these “good” customers would go up.

“Scare tactics,” says Birny Birnbaum, executive director of the Center for Economic Justice. He says insurance companies are not going to raise the rates on their most favorable customers.

Birnbaum, the former chief economist at the Texas Department of Insurance, is vehemently opposed to pricing based on credit history.

“Whether there’s a correlation (with claims) or not, it should not be permitted,” he says. “This is not what we as a society, as a matter of public policy, want as the basis of insurance premiums.

“I don’t know anyone who thinks it’s fair to charge somebody a higher premium because they’ve been the victim of a medical or economic catastrophe.”

The bottom line
Right now, regulators in two states, California and Massachusetts, ban the use of credit-based insurance scores for auto and homeowners insurance. Maryland prohibits the practice for homeowner coverage. Hawaii bans it for auto insurance.

Last year, lawmakers in 16 states considered bills to stop insurance companies from using credit history for pricing purpose. Those bills went nowhere.

Both Washington and Michigan are currently considering legislation to completely ban the practice. If lawmakers in Washington vote to ban the practice, it would be the first legislature in the country to take this bold step.

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People don't really seem to understand. There is a very strong relationship between responsible credit behavior and responsible behavior in general. This is why employers will look at your credit report. This is why your insurance company will look at your credit report.

The bottom line is that if you dislike the way your insurer prices its risk then get another provider. Legislation that prevents companies from using credit reports will lead to people who are more likely to file claims to have lower rates and those who would be likely to file fewer claims will have higher rates. Why people don't understand this I will never get.

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Even so, he notes, the commission found that insurance scoring “likely leads to African-Americans and Hispanics paying relatively more for automobile insurance than non-Hispanic whites and Asians. Hunter told Congress insurance scores are really a “proxy for race” which should not be allowed.

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What a loser. Did he get an F in statistics? Nah, he probably just thinks most people listening to him talk did, and he'd probably be right.

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The bottom line is that if you dislike the way your insurer prices its risk then get another provider. Legislation that prevents companies from using credit reports will lead to people who are more likely to file claims to have lower rates and those who would be likely to file fewer claims will have higher rates. Why people don't understand this I will never get.

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Which is why it's important to force state governments to allow unrestricted competition through state lines, but they don't, I think. That leads, sometimes, to pricing which is not based on competition.

I really doubt if those credit ratings are worth very much if you take them at face value. I probably run a risk of getting a bad score for the simple fact that I am adverse to having credit at all so I don't have any 'lines of credit' of any serious maturity. Not even my mortgage would qualify as such as I only got that 6 years ago. Which leaves me with a standard credit card with a limit of €2.500,--

I must be a real bad risk for those insurers. IIRC I claimed twice in my adult life; once after my car was broken into and once after my phone was stolen in a robbery.

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Originally Posted by Hazir

I really doubt if those credit ratings are worth very much if you take them at face value. I probably run a risk of getting a bad score for the simple fact that I am adverse to having credit at all so I don't have any 'lines of credit' of any serious maturity. Not even my mortgage would qualify as such as I only got that 6 years ago. Which leaves me with a standard credit card with a limit of €2.500,--

I must be a real bad risk for those insurers. IIRC I claimed twice in my adult life; once after my car was broken into and once after my phone was stolen in a robbery.

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Each company is different however if you had a strong pay history on a mortgage for six years you probably would be fine. Remember your insurance company isn't try to determine if you will pay back credit they lend, they don't actually lend anything to you. They just want to check for responsible behavior.

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Originally Posted by Lewkowski

People don't really seem to understand. There is a very strong relationship between responsible credit behavior and responsible behavior in general. This is why employers will look at your credit report. This is why your insurance company will look at your credit report.

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I understand that there's a correlation. Correlation is not causation. I have no problem with the inherent idea of them using credit history, but they need to find a better way of analyzing it, to prevent wrong-headed anecdotal results, if they want regulators to accept it. Avoiding that sort of result is why the system IS regulated. And if it's true that a similar analysis can demonstrate that it is effectively a proxy for race (whether that's intended or unintended) than the concept is just screwed, it will never make it through all the civil rights challenges.

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Originally Posted by Lewkowski

Each company is different however if you had a strong pay history on a mortgage for six years you probably would be fine. Remember your insurance company isn't try to determine if you will pay back credit they lend, they don't actually lend anything to you. They just want to check for responsible behavior.

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Bullshit. They don't care about responsible behavior. They care about whether you're going to file a claim. The credit report isn't a proxy for responsible behavior, it's a correlation for filing a claim. Full stop.

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I understand that there's a correlation. Correlation is not causation. I have no problem with the inherent idea of them using credit history, but they need to find a better way of analyzing it, to prevent wrong-headed anecdotal results, if they want regulators to accept it. Avoiding that sort of result is why the system IS regulated. And if it's true that a similar analysis can demonstrate that it is effectively a proxy for race (whether that's intended or unintended) than the concept is just screwed, it will never make it through all the civil rights challenges.

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Fuzzy - What happens if there is a strong correlation between race and claim filing? Are we going to state that insurance price setting is bad because it charges minorities more?

And why should regulators have to accept it? Insurance is purchased in a free market. States do require insurance, or proof of the financial means to forgo it (in Texas at least). If you dislike the insurance premium, find another company. Let me ask you this, why do you think Insurance companies want to use credit scoring?

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Bullshit. They don't care about responsible behavior. They care about whether you're going to file a claim. The credit report isn't a proxy for responsible behavior, it's a correlation for filing a claim. Full stop.

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The end issue is a claim. However if you are not responsible you will be more likely to get into accident, use the vehicle recklessly and more then likely go to places at odd hours. All of these are potential causes for a claim. Low credit scores are a good indicator of lack of financial responsibility.

Let me ask you this. Why do you think Credit Profiles correlate so well with the likelihood of filing claims?

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Originally Posted by Lewkowski

Fuzzy - What happens if there is a strong correlation between race and claim filing? Are we going to state that insurance price setting is bad because it charges minorities more?

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If there is, than there's no way it's going to get past the higher standards for discrimination on protected categories.

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And why should regulators have to accept it? Insurance is purchased in a free market. States do require insurance, or proof of the financial means to forgo it (in Texas at least). If you dislike the insurance premium, find another company.

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Do you mean why should regulation exist?

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Let me ask you this, why do you think Insurance companies want to use credit scoring?

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Because they think it will let them raise profit margins.

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The end issue is a claim. However if you are not responsible you will be more likely to get into accident, use the vehicle recklessly and more then likely go to places at odd hours. All of these are potential causes for a claim. Low credit scores are a good indicator of lack of financial responsibility.

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You're also more likely to need to make a claim, rather than handling the matter out of your own resources. No one, particularly the insurers, have demonstrated why the correlation exists, but I'll bet you anything that choosing to handle it themselves accounts for a rather greater amount of the correlation than any of your "irresponsibility" rationales.

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Insurance companies don’t use a score provided by one of the big credit bureaus. They create their own “insurance score” using their own criteria. It’s a secret formula; they won’t tell you how your score is computed. In many states, insurance companies aren’t even required to tell customers their credit history was used to set their premium.

“The secrecy behind this credit scoring is part of what makes it so inherently unfair,” Kreidler says. “No two companies use it the same way and when consumers ask, they can’t get a straight answer on how to get a better score.”

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Lewk, how do you expect "people to understand", with this kind of secrecy?

There's probably also a correlation to the deductible amount, even tho the consumer pays for that with slightly higher premiums. I have a higher deductible and would try to pay for any fender-bender out of pocket, in order to keep my claim history down and premiums lower.

But some states have laws requiring ANY auto accident be reported to the police, even a tiny fender bender in a parking lot. Then the accident report ends up with the insurance companies. Nice scheme.

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Do you mean why should regulation exist?

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Yes why should regulators have to accept a rate on car insurance. If you don't like how your premium was calculated go to another company. The idea that racism enters in the picture in anyway is ridiculous.

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Because they think it will let them raise profit margins.

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And the industry is self regulating. If a company charges too much their customers rush for the exit and switch.

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You're also more likely to need to make a claim, rather than handling the matter out of your own resources. No one, particularly the insurers, have demonstrated why the correlation exists, but I'll bet you anything that choosing to handle it themselves accounts for a rather greater amount of the correlation than any of your "irresponsibility" rationales.

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Are you nuts? If you got into a wreck and its going to cost $5k to repair I don't care how much money you have if your deductible is say $1k you are not going to piss away $4k just because you *can*. Irresponsibility however is a natural "reason" behind low credit scores and being involved in more accidents and filing more claims.

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Lewk, how do you expect "people to understand", with this kind of secrecy?

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Logic?

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There's probably also a correlation to the deductible amount, even tho the consumer pays for that with slightly higher premiums. I have a higher deductible and would try to pay for any fender-bender out of pocket, in order to keep my claim history down and premiums lower.

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Sure insurance companies will give you a better deal for a higher deductible - I don't see the point you are trying to make.

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But some states have laws requiring ANY auto accident be reported to the police, even a tiny fender bender in a parking lot. Then the accident report ends up with the insurance companies. Nice scheme.

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Scheme? You mean they are now better able to price your risk?

Simply because your credit score is low and the company charges you more doesn't mean the company has made any more money. At the same time the low credit score person is being charged more... the high credit score person is being charged LESS. The argument here isn't about insurance companies profit it is about how much they get to charge customers who represent a higher or lower risk.

Librulz!

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Originally Posted by Lewkowski

Yes why should regulators have to accept a rate on car insurance. If you don't like how your premium was calculated go to another company. The idea that racism enters in the picture in anyway is ridiculous.



And the industry is self regulating. If a company charges too much their customers rush for the exit and switch.

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Because markets in the real world don't work like our perfect theoretical models, and even if they did, they would only work that way over the very long term. Corrections like you're talking about won't take place over the course of years, but of decades. Some degree of regulation can and does smooth things out, making them work in a more predictable and efficient manner for all parties in the market.

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Are you nuts? If you got into a wreck and its going to cost $5k to repair I don't care how much money you have if your deductible is say $1k you are not going to piss away $4k just because you *can*. Irresponsibility however is a natural "reason" behind low credit scores and being involved in more accidents and filing more claims.

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Except the insurers are going to either drop you or raise your premiums so they recoup that money and more. If you can afford to do handle something without insurance getting involved, it's usually better to do so. The bulk of claims, those things which you're so happy are correlated with credit scores, aren't really large ones. They're moderate claims, and they're often ones that those people with low credit scores can't afford to handle themselves as they might otherwise like to.

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Logic?

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Logic is no kind of substitute for information. Garbage-in, Garbage-out.

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. At the same time the low credit score person is being charged more... the high credit score person is being charged LESS. .

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That's a load of bullshit, a bit of industry PR that has no reflection on reality.

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Originally Posted by Lewkowski

Logic?

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The forumlas are "secret" so there's no way to actually compare companies. If they're using pieces of credit history, that includes credit accounts closed due to inactivity (it's a logical choice, to reduce cards and debt, but illogical to ding consumers for that).

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Sure insurance companies will give you a better deal for a higher deductible - I don't see the point you are trying to make.

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You should, if you work in insurance and understand consumer behavior. I even gave you an example.

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Scheme? You mean they are now better able to price your risk?

Simply because your credit score is low and the company charges you more doesn't mean the company has made any more money. At the same time the low credit score person is being charged more... the high credit score person is being charged LESS. The argument here isn't about insurance companies profit it is about how much they get to charge customers who represent a higher or lower risk.

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They're hedging bets on who files claims and who doesn't, they're guessing their own risk of liability for paying out claims while still making profit.

It is about profit margin and you know it. They say bad credit = high risk = more claims = more pay-out . But insurers are using hazy, secret data and math we can't see, and it's not consistent from company to company or state to state.

It's similar to Moody's and S & P giving bogus ratings to stocks, when corporations pay for the rating agencies. Our Insurance Ratings should be transparent, done by independent actuarials, and not by the very insurers who benefit.

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Because markets in the real world don't work like our perfect theoretical models, and even if they did, they would only work that way over the very long term. Corrections like you're talking about won't take place over the course of years, but of decades. Some degree of regulation can and does smooth things out, making them work in a more predictable and efficient manner for all parties in the market.

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Um no. http://www.insurancejournal.com/news...4/22/99851.htm

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Conversely, retention averages only 83 percent among mono-line auto customers and only 85 percent among policyholders who do not bundle their auto and homeowners insurance.

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Its quite easy to switch carriers. Geico and other companies constantly advertise. You aren't "stuck" with a carrier either - if rates go up you can shop around and switch coverage in a 15 minute phone call.

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Except the insurers are going to either drop you or raise your premiums so they recoup that money and more. If you can afford to do handle something without insurance getting involved, it's usually better to do so.

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No one is going to piss away $4k. Furthermore are you familiar with how insurance claims work? If you are at fault for the accident your insurance is already paying for the other person's damage anyway, might as well get your vehicle fixed too. If you aren't at fault, its the other person's insurance paying for yours. Unless they had no insurance and you had the optional uninsured motorist coverage. In that case, the accident wasn't your fault. With a few exceptions, such as a single vehicle accident you yourself caused (like running into a tree) your insurance was already going to pay out, or the claim wasn't your fault.

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That's a load of bullshit, a bit of industry PR that has no reflection on reality.

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If an insurance carrier just across the board raises rates by 20% - do you think their customers will start shopping around? Hey if you want to prove some kind of maleficence then you find a time frame that insurance carriers started using credit profiles and then compare the Return on Assets for the industry before and after that time frame. I'm not even sure if you could pin point a time but I think this whole "they just raise rates due to credit scores and no one gets a discount" is total bull shit. Companies that just raise rates will lose customers, the insurance industry, especially for vehicles, is highly competitive.

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The forumlas are "secret" so there's no way to actually compare companies. If they're using pieces of credit history, that includes credit accounts closed due to inactivity (it's a logical choice, to reduce cards and debt, but illogical to ding consumers for that).

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Its not the closing of the account that's the big deal its the increase in the proportion of available credit verses your credit limits that hurts your score. And of course remember insurance companies are not using your credit score

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It is about profit margin and you know it. They say bad credit = high risk = more claims = more pay-out . But insurers are using hazy, secret data and math we can't see, and it's not consistent from company to company or state to state.

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Of course its not consistent from company to company! That's why it pays to shop.

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Our Insurance Ratings should be transparent, done by independent actuarials, and not by the very insurers who benefit.

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Why? It is a business where the insurance companies try to make money. If you dislike one companies method go to another. They are competitive alternatives, there is no monopoly in the insurance industry. Most insurance coverage that consumers buy is optional. (Liability only is the minimum that is required in most states). And home owners insurance isn't required either unless you have a mortgage - ie no state law requires it.

Whats next? An examination of Apple by regulators? "Hey guys making the iPod doesn't cost that much you don't get to just charge whatever you want! Lower your prices now!"

Just how Big Brother do you want the government to be? Should the government decide what a "fair profit" is? So question for you GGT - not counting investment income how much money should an insurance company make off of their premiums after the cost of claims and expenses for running their business? For a $100 should they be able to make $10 profit and the $90 go towards claims and expenses? What about $80/$20? $70/$30?

And what will happen if that mortgage disappears from my history because it's paid off ? Then all they could see is that I've got a mediocre credit card. And I can't help but thinking that that will make a lot of red flags go up, because if I am not borrowing that must mean nobody wants to lend me. By the warped logic of credit ratings.

Oh and Lewk, I sure as hell would assume that any insurance company that's making a healthy profit is one you don't want to have any policies with.

It's not Big Brother, it's appropriate government oversight, to have some regulations in industries we are REQUIRED BY LAW to participate in....auto and homeowner's. How many have no mortgage and own their home outright? And even if they own outright they'll want property and casualty coverage. Accidents DO happen.

You know damn well the industry won't let all companies sell in all states, so it's not the freeee market you want to believe.

Keep ignoring the industry's secret math formulas. ho hum how surprising.

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Originally Posted by Lewkowski

Um no. http://www.insurancejournal.com/news...4/22/99851.htm



Its quite easy to switch carriers. Geico and other companies constantly advertise. You aren't "stuck" with a carrier either - if rates go up you can shop around and switch coverage in a 15 minute phone call.

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It doesn't matter if you aren't stuck with someone. You're talking about a market fix to a structural performance problem. Pay attention to that line about an overall 90% retention rate. Also note that they do absolutely nothing to explain why people move, beyond a vague reference to recession problems. You know why most of those 10% move? Because their insurer changed something that affected them negatively. There's a difference between leaving and being driven away.

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No one is going to piss away $4k.

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Yeah, they will. Because they're not pissing it away, they're saving money in the long run.

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Furthermore are you familiar with how insurance claims work? If you are at fault for the accident your insurance is already paying for the other person's damage anyway, might as well get your vehicle fixed too. If you aren't at fault, its the other person's insurance paying for yours. Unless they had no insurance and you had the optional uninsured motorist coverage. In that case, the accident wasn't your fault. With a few exceptions, such as a single vehicle accident you yourself caused (like running into a tree) your insurance was already going to pay out, or the claim wasn't your fault.

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And in all those situations, your insurer is also going to raise your rates, probably your deductible, and make various other changes because now, actuarially, you're a bigger risk than you were before.

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If an insurance carrier just across the board raises rates by 20% - do you think their customers will start shopping around?

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If the price of potatoes rises in Des Moines, does the tree falling in a forest make a sound? Your statement has nothing to do with what I said, or what I was replying to.

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Hey if you want to prove some kind of maleficence

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What maleficence? There's a fiduciary duty to wring as much blood from the stone as possible.

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I'm not even sure if you could pin point a time but I think this whole "they just raise rates due to credit scores and no one gets a discount" is total bull shit.

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And why would people leave a company that is not raising their rates, but leaving them exactly as they were before? Particularly when no one but the insurance company "knows" they're less of a risk because the methodology is kept secret?

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It doesn't matter if you aren't stuck with someone. You're talking about a market fix to a structural performance problem. Pay attention to that line about an overall 90% retention rate. Also note that they do absolutely nothing to explain why people move, beyond a vague reference to recession problems. You know why most of those 10% move? Because their insurer changed something that affected them negatively. There's a difference between leaving and being driven away.

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People tend to stick with what they know, but price shopping goes on all the time and rate hikes encourage it. If someone is paying more then they would if they went with someone else, that is their choice and it shouldn't be illegal to charge someone more or less for the service you are giving them in regards to risk.

Lets boil it down even to a more strident easy to understand statement. IF insurance companies wanted to charge people more because they drive Ford's and the owner of the insurance company hates Ford then so be it. Its a free country (in theory). This is like your neighborhood store raising prices on can of corn. Or the mechanic raising his price for an oil change.

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Yeah, they will. Because they're not pissing it away, they're saving money in the long run.

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Nope. Your just absolutely wrong on this. I have never heard, not ONCE at any point someone saying "I'm not gonna file a claim for thousands of dollars because it will raise my rates!" Never. Furthermore why the hell even have insurance if you aren't going to use it? Don't give me this "its required." Because if this theoretically rich person who isn't going to file a claim because it will raise his rate... he would of had to have some other form of insurance then liability only to be in any position to say no to a claim. The *only* claims that his insurance company would be paying is for *other* people's vehicles.

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And in all those situations, your insurer is also going to raise your rates, probably your deductible, and make various other changes because now, actuarially, you're a bigger risk than you were before.

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Why would your insurer raise rates on an accident that was not your fault? You are not a bigger risk if someone rear ends you and they didn't have insurance so your insurance paid the damages because you had uninsured motorist coverage.

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If the price of potatoes rises in Des Moines, does the tree falling in a forest make a sound? Your statement has nothing to do with what I said, or what I was replying to.

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I am attempting to get you to understand that insurance is a price sensitive product. By disallowing the use of credit scores you are not changing the amount that insurance companies charge the populace as a whole. You simply have some people paying more then they would have before and some people paying less.

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And why would people leave a company that is not raising their rates, but leaving them exactly as they were before? Particularly when no one but the insurance company "knows" they're less of a risk because the methodology is kept secret?

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People do occasional listen to all those commercials on TV about saving money on car insurance. You seem to have a reasonably level head normally. I'm astonished you can not grasp the concept that if your being charged too high with one carrier that you can switch. And if the correlation is not as strong as was believed in credit score vs. claims then a carrier would jump on the chance to get the business of those low credit score folks because they would be making a profit on them compared to other companies charging too high of a rate. But that is not happening because Credit Score IS a solid indicator of the likelihood that a person will file a claim. Furthermore there are additional costs for dealing with people who have a problem paying their bills on time.

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It's not Big Brother, it's appropriate government oversight, to have some regulations in industries we are REQUIRED BY LAW to participate in....auto and homeowner's. How many have no mortgage and own their home outright? And even if they own outright they'll want property and casualty coverage. Accidents DO happen.

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You are not required by law to own a home. You are not required by law to have a mortgage. And of course someone will want to insure their home, its an asset that should be protected and typically it doesn't cost too much for that protection. Furthermore some states don't require auto insurance. I did a quick look at California for example has several other options as well. I imagine most states will though I could be wrong.

http://www.dmv.ca.gov/pubs/brochures...cts/ffvr18.htm

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* A motor vehicle liability insurance policy
* A cash deposit of $35,000 with DMV
* A DMV issued self-insurance certificate
* A surety bond for $35,000 from a company licensed to do business in California.

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You know damn well the industry won't let all companies sell in all states, so it's not the freeee market you want to believe.

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Are you sure you aren't getting this confused with Health Insurance?

http://archives.chicagotribune.com/2...insuranceaug23

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The easiest way to see how insurance competition benefits consumers is to look at auto insurance. That’s a huge, nationwide market and companies compete intensively for a share of it. Some stress their low prices, others customer service, whatever gives them an edge in the marketplace. Geico and Progressive have been especially aggressive in touting cost savings. State Farm and Allstate certainly compete on price, but they stress service after an accident. That’s why Allstate says “you’re in good hands,” and State Farm says it will be there “like a good neighbor.” Other companies, like SafeAuto, focus on drivers who want only minimum coverage to meet state license requirements. In short, auto insurance companies compete vigorously to provide what different consumers want, and they tell them so in national advertisements.

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Originally Posted by Lewkowski

People tend to stick with what they know, but price shopping goes on all the time and rate hikes encourage it. If someone is paying more then they would if they went with someone else, that is their choice and it shouldn't be illegal to charge someone more or less for the service you are giving them in regards to risk.

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THAN. The word is than. I hope you're not homeschooling your own kids.

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Originally Posted by Lewkowski

Why would your insurer raise rates on an accident that was not your fault? You are not a bigger risk if someone rear ends you and they didn't have insurance so your insurance paid the damages because you had uninsured motorist coverage.

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And here you demonstrate your complete ignorance. This is auto-insurance 101. You ARE a bigger risk for making future claims after you've been in one accident, even one where you were incontrovertibly not at fault. Ditto for making any claim whatsoever.

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But that is not happening because Credit Score IS a solid indicator of the likelihood that a person will file a claim. Furthermore there are additional costs for dealing with people who have a problem paying their bills on time.

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I am not and have never denied that the correlation is solid. That doesn't mean it is appropriate to use, even if you can demonstrate that it is more than mere correlation but causation *which you can't*

It's also could HAVE, would HAVE, should HAVE.

Read the fine policy offer fine print, most have small disclaimers that 'this product is not available in the states of X Y Z'.
The following are all Lewk quotes:

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The bulk of claims, those things which you're so happy are correlated with credit scores, aren't really large ones. They're moderate claims, and they're often ones that those people with low credit scores can't afford to handle themselves as they might otherwise like to.

This is why your insurance company will look at your credit report.

Let me ask you this, why do you think Insurance companies want to use credit scoring?

And of course remember insurance companies are not using your credit score

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Which magic math are you using, which Credit Reports are you talking about....the insurance industry has a secret one. Why don't you stop bullshitting around and explain the formula that no consumer "understands"?

When I moved into my last house, the landlord ran my credit via (I think) Experian, and it came back at 729, which is pretty damn close to the creditkarma score of 724 I had at the time. Landlord said that was good enough that he didn't need to worry about running anyone elses credit.
Not bad for being 24 :up:

In the same month GMAC said my rate was higher than it should have been because my credit score was poorer than they like. GMAC, the same company who, less than 6 months earlier, approved me sight unseen for a 0% $30,000+ car loan, with no trade and no down payment. :confused:

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Originally Posted by Lewkowski

Why would your insurer raise rates on an accident that was not your fault? You are not a bigger risk if someone rear ends you and they didn't have insurance so your insurance paid the damages because you had uninsured motorist coverage.

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They'll raise them under the logic that you must be driving through or leaving your vehicle in areas prone to accidents. At my first job I used to always park my car in the same spot on a side street near the office. One day I come out to find the back driver's side door crumpled into the car. There was no note on the car. Police took an accident report and told me that it looked like someone had backed their car into my door and kept going. So I call up my insurance company to talk about filing a claim. Damages were around $600 as the door would have to replaced. The representative I talked with said that they'd only cover $300, and that if I did file, my rates would go up. Didn't file, paid the amount out of pocket after I found someone else who would do it for hundreds less. Thanks Allstate. :bored:

As usual for Lewk, just try to track what's in it for him. Lewk is obviously in the insurance business.

Mind you, Lewk and I agree on things like artificial rates in at-risk areas, like SE beach front.

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Originally Posted by LittleFuzzy

Logic is no kind of substitute for information. Garbage-in, Garbage-out.

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just wanted to say that this is a very interesting discussion and that the above comment is :up: :up:

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And here you demonstrate your complete ignorance. This is auto-insurance 101. You ARE a bigger risk for making future claims after you've been in one accident, even one where you were incontrovertibly not at fault. Ditto for making any claim whatsoever.

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Sigh. Accidents that are completely not your fault are not going to be counted against you. Are there some insurance companies out there that will count it against you, well sure its possible there are after all tons of them out there. Nonetheless even if you are right that insurance will raise your rates... so what? Don't like it? Move to a different carrier.

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I am not and have never denied that the correlation is solid. That doesn't mean it is appropriate to use, even if you can demonstrate that it is more than mere correlation but causation *which you can't*

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Why not? And while we can't "prove" that financial recklessness automatically means you are a more reckless driver there is a linkage. Why are you so opposed to the use of credit scoring? And why do you think insurance companies should be shacked by big brother when it comes to rates? Do you think Wal-Mart or Apple should face similar regulation?

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Which magic math are you using, which Credit Reports are you talking about....the insurance industry has a secret one. Why don't you stop bullshitting around and explain the formula that no consumer "understands"?

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They don't use the "credit score" they use the information on the credit report. Looking over my posts I have used "credit score" incorrectly some of the time. Keep in mind that there isn't only one "true" credit score either. Insurance companies extract the relevant information they need when underwriting.

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They'll raise them under the logic that you must be driving through or leaving your vehicle in areas prone to accidents.

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Your zip code is already used when determining your premium. Again not seeing all insurance companies won't charge you more for filing a claim - that is the beauty of our competition each company gets to make decisions and you can look to find the one that best meets your needs.

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Read the fine policy offer fine print, most have small disclaimers that 'this product is not available in the states of X Y Z'.

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That is because each state has different insurance regulations. The national chains (GEICO/All State ect) make sure they have their ducks in a row for all (or most) states. Other insurance companies are more local and only cover one state, or a couple of states. It would cut costs for those national chains if there was one federal regulatory body regarding insurance.

http://www.propertyinsurancecoverage..._R_%201880.pdf

Otherwise known as an Optional Federal Charter. This would also the streamlining of regulation in regards to insurance. Currently national insurance groups have to license their agents in several states and when someone moves they may have to deal with someone else then they have been used to working with.

I say that enough things in life rely on your credit score. If you have a safe driving record and pay your premiums on time then credit score should have no place in cost of insurance.

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Originally Posted by Lewkowski

Accidents that are completely not your fault are not going to be counted against you.

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Does anyone, anyone (moralless Lewk need not waste his story telling talents replying), know of a single insurance company where this is true 100% of the time?
Insurance companies don't even hide behind such a down right lie. The average is 1 free pass, but I've never seen anyone dumb enough to think that only certain claims are attached to your insurance record and price calculation.

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Originally Posted by Lewkowski

Why are you so opposed to the use of credit scoring?

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They don't use the "credit score" they use the information on the credit report. Looking over my posts I have used "credit score" incorrectly some of the time. Keep in mind that there isn't only one "true" credit score either. Insurance companies extract the relevant information they need when underwriting.

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Sigh. Write it out or give us a link, show us how the industry uses bits from our credit report or FICO score, plus zip code or other "relevant" data, and comes up with their Secret Sauce that determines our rates. Go ahead, it should be simple, since you work in the industry and want to educate us all.

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Originally Posted by Weber

I say that enough things in life rely on your credit score. If you have a safe driving record and pay your premiums on time then credit score should have no place in cost of insurance.

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Or in other words you are outlawing the freedom to form a company and run it as you will. Why do you hate freedom?

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Sigh. Write it out or give us a link, show us how the industry uses bits from our credit report or FICO score, plus zip code or other "relevant" data, and comes up with their Secret Sauce that determines our rates. Go ahead, it should be simple, since you work in the industry and want to educate us all.

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The original story posted mentioned that they don't use the credit score. Furthermore EACH company is different. For all I know one company just uses the credit score. Another may not. In the competitive insurance industry different companies are going to approach underwriting in a different fashion. And that is a GOOD thing.

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Originally Posted by Lewkowski

The original story posted mentioned that they don't use the credit score. Furthermore EACH company is different. For all I know one company just uses the credit score. Another may not. In the competitive insurance industry different companies are going to approach underwriting in a different fashion. And that is a GOOD thing.

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So you don't know. Only the insurers know, and they're not telling.

From your article, again:

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Insurance companies don’t use a score provided by one of the big credit bureaus. They create their own “insurance score” using their own criteria. It’s a secret formula; they won’t tell you how your score is computed. In many states, insurance companies aren’t even required to tell customers their credit history was used to set their premium.

“The secrecy behind this credit scoring is part of what makes it so inherently unfair,” Kreidler says. “No two companies use it the same way and when consumers ask, they can’t get a straight answer on how to get a better score.”

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Originally Posted by GGT

Lewk, how do you expect "people to understand", with this kind of secrecy?

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Are you just a shill for your employer, or what?

Sigh. You can extrapolate common sense findings. Oh look your premium went up when your credit profile dived. Wow there must be a connection. Some states require notification before using the credit profile. And yeah whats wrong with keeping secrets on how rates are determined. Basic truths are easy to see - don't cause accidents, don't get tickets, pay your bills on time.

Should we be demand to know how Target figures out the price of goods on the shelf?

And you wonder why consumers want the industry regulated. Tell us which company you work for, that'd be a hoot.

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Originally Posted by GGT

And you wonder why consumers want the industry regulated. Tell us which company you work for, that'd be a hoot.

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I'd like to know as well.

Me too. I bet Consumer Reports gives it a crappy rating. :D

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Originally Posted by GGT

And you wonder why consumers want the industry regulated. Tell us which company you work for, that'd be a hoot.

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What don't you want regulated?

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Originally Posted by Lewkowski

Sigh. You can extrapolate common sense findings. Oh look your premium went up when your credit profile dived. Wow there must be a connection. Some states require notification before using the credit profile. And yeah whats wrong with keeping secrets on how rates are determined. Basic truths are easy to see - don't cause accidents, don't get tickets, pay your bills on time.

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Insurance scoring is not logical nor is it common sense. It's not as simple as avoiding accidents or tickets, or paying bills on time. You acknowledged this. They can also penalize based on marital status, employment changes, zip code, bankruptcies, asset holdings (if the insurance company is owned by your bank, they can share account information).

Using credit reports and FICO scores is also suspect, since those ratings aren't always accurate, they only show snap shots in time---of the past---they don't necessarily predict future spending and credit habits. People contest credit/FICO all the time, they're full of errors, they change monthly/yearly.

Secretive ways of underwriting and rate-assigning means the consumer can't fully buy (or negotiate) the product or service they want. The whole point of insurance is to benefit and protect the consumer, but we're penalized for using the very service we buy if we make a claim.

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Should we be demand to know how Target figures out the price of goods on the shelf?

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Irrelevant.

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Originally Posted by Lewkowski

What don't you want regulated?

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Irrelevant.

Why don't you just admit it: the insurance industry isn't trying to predict our risk of a car accident as much as they're trying to hedge bets on whether we'll file claims.

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Why don't you just admit it: the insurance industry isn't trying to predict our risk of a car accident as much as they're trying to hedge bets on whether we'll file claims.

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I've said it already in this thread. But if you want me to be specific. Yes insurance underwrites the risk of claims. That includes accidents, theft, vandalism to your car and non-moving accidents (your parked car gets damaged but something). And when underwriting this risk, why shouldn't the insurance companies stick higher prices to those who file more claims?

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Insurance scoring is not logical nor is it common sense. It's not as simple as avoiding accidents or tickets, or paying bills on time. You acknowledged this. They can also penalize based on marital status, employment changes, zip code, bankruptcies, asset holdings (if the insurance company is owned by your bank, they can share account information).

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And I don't see a problem with this. If it turned out that people with the last name of L are more likely to file a claim then other folks whose last name doesn't start with a L and insurance decided to raise rates on everyone with a last name that starts with an L... I wouldn't be pleased at the higher rate but I wouldn't be calling for the insurance company to be regulated. Because I believe in freedom and a free market.

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Originally Posted by Lewkowski

I've said it already in this thread. But if you want me to be specific. Yes insurance underwrites the risk of claims. That includes accidents, theft, vandalism to your car and non-moving accidents (your parked car gets damaged but something). And when underwriting this risk, shouldn't the insurance companies stick higher prices to those who file more claims?

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Because that's not where they limit their crystal ball gazing. They go on the assumption someone might file a claim using bogus potential factors. Charge more for people who drive to restaurants in the city and have a martini with dinner? How about if they use a cell phone while driving?

After people file a claim for damages, which is what insurance is supposed to offer, they ding you and raise premiums. Nobody is falling for the "Lookie at us, we've got big hearts, we have "accident forgiveness" for your first claim!

They're charging on assumptions, then charging for using the product. The only reason they get away with this is (a) insurance is required by most state law, and (b) underwriting is not regulated like premiums are. Nice scheme.

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And I don't see a problem with this. If it turned out that people with the last name of L are more likely to file a claim then other folks whose last name doesn't start with a L and insurance decided to raise rates on everyone with a last name that starts with an L... I wouldn't be pleased at the higher rate but I wouldn't be calling for the insurance company to be regulated. Because I believe in freedom and a free market.

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Of course you don't see a problem. You're a shill for your insurance company employer. You know damn well this isn't freeeedom and freeeeee market operations at work. It's industry bullying to make profit, with protections thru congress.

You're advocating profiling based on things that don't prove causation and may well be discriminatory without basis. Might as well try that with "foreign sounding last names" like Yun or Li or Szinski. As long as you get a paycheck from Allstate or whomever, you don't really give a crap who they extort or how it's done.